Company Update (NASDAQ:FEYE): FireEye Inc Reports Record Revenue for Third Quarter 2015


FireEye Inc (NASDAQ:FEYE), the leader at stopping today’s advanced cyber attacks, today announced financial results for the third quarter of 2015.

“We delivered a solid quarter of overall growth, with revenue up 45 percent and non-GAAP operating margins and earnings per share well ahead of our outlook,” said David DeWalt, FireEye chief executive officer and chairman of the board. “The new releases of our MVX engine and our HX endpoint platform last month, together with the partnerships we announced during the quarter, further strengthened our ability to detect, prevent and contain advanced threats.”

“Our role as first responder to today’s most significant breaches, combined with our threat research labs and global FireEye as a Service infrastructure, gives us unique visibility into threats as the attackers adapt their tactics. We support our technology, consulting services and threat intelligence leadership with a solid financial foundation and $1.2 billion in cash, cash equivalents and short-term investments. I believe we have never been in a stronger position to help organizations reduce risk as the threat landscape evolves,” added DeWalt.

Third Quarter Financial Highlights

  • Revenue of $165.6 million, an increase of 45 percent from the third quarter of 2014.
  • Billings of $210.6 million, an increase of 28 percent from the third quarter of 2014.1
  • Current deferred revenue of $265.9 million, up a record $105.1 million, or 65 percent, from the end of the third quarter of 2014.
  • Total deferred revenue of $454.9 million, an increase of $171.9 million, or 61 percent, from the end of the third quarter of 2014.
  • GAAP operating margin of negative 74 percent, compared to negative 114 percent in the third quarter of 2014.
  • Non-GAAP operating margin of negative 32 percent, compared to negative 64 percent in the third quarter of 2014.1
  • GAAP net loss per share of $0.88, compared to a GAAP net loss per share of $0.83 in the third quarter of 2014.
  • Non-GAAP net loss per share of $0.37, compared to a non-GAAP net loss per share of $0.51 in the third quarter of 2014.1
  • Cash flow used in operations of $8.3 million, an improvement of $38.2 million compared to the third quarter of 2014.

1A reconciliation of GAAP to non-GAAP financial measures is provided in the financial statement tables included in this press release. An explanation of these measures is also included under the heading “Non-GAAP Financial Measures.”

“The leverage inherent in our business model was evident in the 32 percentage point improvement in our non-GAAP operating margin and our operating cash flow performance. Our operating margin has improved year-over-year in every quarter since the second quarter of 2014, as we continue to balance growth with progress on our path to profitability,” said Mike Berry, FireEye senior vice president and chief financial officer. “Also significant was an improvement in our operating cash flow by nearly $159 million year-to-date, compared to the first nine months of 2014.”

“While we outperformed on many financial metrics, our billings performance did not meet the expectations we set in late July. The strength evident in our sales to new logo customers, our North American enterprise business and the Asia-Pacific region was partially offset by weakness in Europe. We believe this was due to a combination of macroeconomic factors, as well as the growing pains of a new organization. Additionally, the third quarter of 2014 included a large, five-year transaction that extended the average contract length to 34 months. This created a difficult year-over-year comparison and impacted our year-over-year billings growth rate as the average contract length declined to approximately 30 months in the third quarter of 2015,” added Berry.

Fourth Quarter and Updated 2015 Outlook
FireEye provides guidance based on current market conditions and expectations.

For the fourth quarter of 2015, FireEye expects total revenue in the range of $182 to $190 million. Additionally, for the fourth quarter, on a non-GAAP basis, the company expects:

  • Total billings in the range of $240 to $260 million.
  • Gross margin in the range of 72 to 74 percent of revenue.
  • Operating margin in the range of negative 28 to negative 31 percent of revenue.
  • Interest expense of $3.0 million related to the company’s convertible senior notes.
  • Net loss per share of $0.36 to $0.38, based on estimated weighted average shares outstanding of approximately 156 million.

For 2015, the company currently expects total revenue in the range of $620 to $628 million. Additionally, for 2015, on a non-GAAP basis, the company expects:

  • Total billings in the range of $780 to $800 million.
  • Gross margin in the range of 72 to 73 percent of revenue.
  • Operating margin in the range of negative 38 to negative 39 percent of revenue.
  • Interest expense of $7.0 million related to the company’s convertible senior notes.
  • Net loss per share of $1.61 to $1.63, based on estimated weighted average shares outstanding of approximately 154 million.
  • Positive cash flow from operations.

Guidance for non-GAAP financial measures excludes stock based compensation, amortization of intangible assets, non-cash interest expense related to the company’s convertible senior notes, and other non-recurring expenses. A reconciliation of non-GAAP guidance measures to corresponding GAAP measures is not available on a forward-looking basis.

Business Highlights
Business highlights since the release of second quarter 2015 financial results on July 30, 2015 included multiple product announcements, continued expansion of the company’s ecosystem of partners, and the discovery of new advanced attacks, including an advanced campaign which appears to target organizations in Bangladesh, India, Nepal and Pakistan seeking information on border disputes and other diplomatic matters.

The company announced that software industry veteran Michael Berry joined the company as senior vice president and chief financial officer and thatDeepak Ahuja, Tesla’s first chief financial officer, joined the FireEye board of directors. Additionally, David Ramirez joined the company as president of global government and Vijaya Kaza joined the company from Cisco as senior vice president of cloud analytics engineering.

Recent accolades and awards for FireEye’s technology and security solutions included:

  • Recognition of FireEye as the leading provider of “must have” network security technology for advanced attacks in a report by industry research firm Frost and Sullivan. The report found that the combination of features and 62 percent market share established FireEye as the clear leader of the network security sandbox segment.
  • Confirmation of FireEye’s continued market share leadership by IDC in its report Worldwide Specialized Threat Analysis and Protection Market Shares, 2014: Rapidly Evolving Security Defenses (October 2015, document #259667).

Significant enhancements to the FireEye Threat Prevention Platform included:

  • The next generation of the company’s core MVX™ architecture, which tripled analysis speed to improve time to protection and added visibility into SSL encrypted traffic.
  • The FireEye HX™ Endpoint 3.0 product, which extends FireEye Threat Intelligence to the endpoint and adds enterprise search capabilities that enable quick and precise security searches across endpoints to help organizations rapidly find and mitigate threats.
  • The FireEye Threat Intelligence Engine™, the threat intelligence capability that both powers and leverages the company’s threat prevention products and service offerings. The FireEye Threat Intelligence Engine optimizes the intelligence production cycle, capturing, processing, analyzing intelligence and delivering these insights to FireEye customers and analysts.

FireEye continued to expand its global reach and extend its technology, expertise and intelligence to new customers with:

  • The availability of Visa Threat Intelligence, Powered by FireEye, a jointly-developed solution tailored to the needs of the payments industry that will deliver real-time threat information to Visa merchants and issuers so they can quickly assess and act on cyber attacks that could breach their payment systems.
  • A global partnership with F5 Networks to defend against the evolving security threats to the enterprise with comprehensive security solutions that integrate application delivery infrastructure from F5 and advanced threat protection from FireEye Network Security. The agreement also includes a unified approach to worldwide sales, deployment and support, to help ensure the best possible end-to-end experience for customers. (Original Source)

Shares of FireEye are trading down 12.50% to $25.48 in after-hours trading. FEYE has a 1-year high of $55.33 and a 1-year low of $26.03. The stock’s 50-day moving average is $31.43 and its 200-day moving average is $41.37.

On the ratings front, FireEye has been the subject of a number of recent research reports. In a report issued on October 23, Wedbush analyst Steven Koenig downgraded FEYE to Hold, with a price target of $32, which implies an upside of 9.0% from current levels. Separately, on October 15, Stephens Inc’s Jonathan Ruykhaver maintained a Hold rating on the stock and has a price target of $37.

According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Steven Koenig and Jonathan Ruykhaver have a total average return of 5.3% and 12.5% respectively. Koenig has a success rate of 48.9% and is ranked #1174 out of 3824 analysts, while Ruykhaver has a success rate of 50% and is ranked #1049.

The street is mostly Neutral on FEYE stock. Out of 10 analysts who cover the stock, 7 suggest a Hold rating and 3 recommend to Buy the stock. The 12-month average price target assigned to the stock is $35.25, which implies an upside of 20.0% from current levels.

FireEye Inc provides cybersecurity solution for detecting, preventing and resolving cyber-attacks that evade legacy signature-based security products. Its solutions include traditional and next-generation firewalls, IPS, anti-virus, and gateways.